October 11, 2019

No, Billionaire Tax Rates Aren’t Lower Than Middle-Class Rates

The Washington Post says the wealthy aren’t paying their “fair share.”

“For the first time in history, America’s richest billionaires paid a lower effective tax rate than the working class,” The Washington Post claims. The story asserts that in 2018 “the average effective tax rate paid by the richest 400 families in the country was 23 percent, a full percentage point lower than the 24.2 percent rate paid by the bottom half of American households.” How did the Post come to this surprising conclusion? Via the dubious efforts of economists Emmanuel Saez and Gabriel Zucman, about whom the Post admits, “not all economists accept [their] analysis.” No kidding.

The biggest hole in Saez and Zucman’s assertion is the fact that they don’t calculate the earned-income tax credit (EITC) into their analysis. For example, those individuals who paid $1,000 in federal income taxes and then received a $1,500 credit would have an overall tax burden of -$500, not $0 as Saez and Zuchman calculated. As Harvard professor and former Barack Obama economic adviser Jason Furman, who’s no supporter of Donald Trump’s tax cuts, notes, “The best estimates indicate that the tax system is progressive — with the rich paying a higher tax rate than everyone else.”

Not only that, but huge numbers of Americans don’t pay anything. As MarketWatch reported earlier this year, “Approximately 76.4 million or 44.4% of Americans won’t pay any federal income tax in 2018, up from 72.6 million people or 43.2% in 2016 before President [Donald] Trump’s Tax Cuts and Jobs Act, according to estimates from the Tax Policy Center, a nonprofit joint venture by the Urban Institute and Brookings Institution, which are both Washington, D.C.-based think tanks.” Notably, once again, even the leftist Tax Policy Center acknowledges that Trump’s tax cuts mean fewer Americans pay income taxes — which, for the record, isn’t our favorite feature of those cuts.

But those same Trump tax cuts, passed by congressional Republicans without a single Democrat vote, have proven to boost the economy. Middle-class households have essentially experienced a pay raise of $4,000 through reduced taxes and boosted wages. The reality is that under Trump, nearly everyone from the wealthy to the lower-income have seen their taxes decrease. And honestly, if the Left really wanted a tax system where everyone truly pays “their fair share,” they’d be clamoring for a flat tax.

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